AK Steel Holding Corporation (NYSE:AKS)
Q: I was looking up AKS and it states it is still in a Down Trend since 7/10 but yet the price is up 18% in 5 days? Is it clear why this would still be classified in a Down Trend? Just curious as a new subscriber and this was a play I had been watching before joining.
A:Thanks Todd. AKS has been a tough one for us in recent weeks. Occasionally some downtrends are called right at support levels and then bounce, which is what we call a whipsaw. Whipsaws are more frequent in sideways markets but with trend trading, catching the big trends pays for them all and then some. Look at our example on Sprint on the first page of this forum, it explains this concept pretty well. Similarly for AKS, there are occasional whipsaws but following trends keeps you in the game for the big moves. Like the Uptrend call on AKS in Jan 2008 @ $41 was good for 21 points (51%) and then the Downtrend alert in August 2008 @ $54 that was good for almost 46 points. Over the past 2 years, our average winning trade for AKS has been 2.3x the average losing trade. With a ratio like that, you don’t need all trades to be winners.Having said all that, AKS is a situation where it had fallen far enough from $21 to $15 where a Downtrend would be in order. But AKS did manage to find its 200-day moving average and bounce. Should the trend continue higher, the trend may reverse itself but our system is conservative first in that it wants to prevent calling every bounce which could be a potential trap. During that fall from $70 to the single digits there were a number of sharp rallies that our system avoided – which turned out to be good non-calls. Over time, as markets change from bearish to flat to bullish, SmarTrend learns what the new tolerances are for each stock and makes adjustments so it can react quicker in calling new trends. Given what the market just went through, it wants a little more proof that things are all good again.